Correlation Between CommScope Holding and Cisco Systems

Can any of the company-specific risk be diversified away by investing in both CommScope Holding and Cisco Systems at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining CommScope Holding and Cisco Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CommScope Holding Co and Cisco Systems, you can compare the effects of market volatilities on CommScope Holding and Cisco Systems and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in CommScope Holding with a short position of Cisco Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of CommScope Holding and Cisco Systems.

Diversification Opportunities for CommScope Holding and Cisco Systems

0.59

Correlation Coefficient

CommScope Holding  Cisco Systems

Very weak diversification

The 3 months correlation between CommScope and Cisco is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding CommScope Holding Co and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems and CommScope Holding is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on CommScope Holding Co are associated (or correlated) with Cisco Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisco Systems has no effect on the direction of CommScope Holding i.e., CommScope Holding and Cisco Systems go up and down completely randomly.

Pair Corralation between CommScope Holding and Cisco Systems

Given the investment horizon of 90 days CommScope Holding Co is expected to under-perform the Cisco Systems. In addition to that, CommScope Holding is 4.02 times more volatile than Cisco Systems. It trades about -0.17 of its total potential returns per unit of risk. Cisco Systems is currently generating about -0.07 per unit of volatility. If you would invest  4,928  in Cisco Systems on January 25, 2024 and sell it today you would lose (95.01) from holding Cisco Systems or give up 1.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

CommScope Holding Co  vs.  Cisco Systems

CommScope Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CommScope Holding Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Cisco Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cisco Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with CommScope Holding and Cisco Systems

The main advantage of trading using opposite CommScope Holding and Cisco Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CommScope Holding position performs unexpectedly, Cisco Systems can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Cisco Systems will offset losses from the drop in Cisco Systems' long position.

The idea behind CommScope Holding Co and Cisco Systems pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.